Located mainly in Western Asia, with a smaller portion situated in Southeastern Europe, Turkey is a transcontinental country. Due to its location, Turkey ranks 10th in the world by deadweight tonnage for its owned merchant fleet and 8th globally as a supplier of seafarers. The commercial shipping sector's total fleet value exceeds USD 22 billion following rapid expansion over the last 15 years.

Beyond its established trade routes, Turkey's population of nearly 90 million has helped make its digital economy a fast-growing sector, accounting for approximately 5% of GDP. This growth has been driven by strong mobile internet penetration; over 85% of the population has access, and a young, tech-savvy demographic

The development of the digital economy also brought regulatory changes that affected not only local businesses, but also non-resident digital service providers who became subject to VAT rules and requirements in Turkey. Under this regime, qualifying non-resident providers are responsible for charging, declaring, and paying Turkish VAT on supplies to Turkish consumers.

Turkey’s VAT Framework for Digital Services

Turkey introduced VAT liability for non-resident businesses supplying digital services to Turkish individuals in 2018. The change was introduced by Law No. 7061, which amended the Turkish VAT Law. Under the new rules, a non-resident business with no residence, workplace, registered headquarters, or business center in Turkey is responsible for declaring and paying Turkish VAT on digital services supplied to Turkish consumers. Moreover, the new rules required them to register for a special VAT liability known as the “Special VAT Liability for Electronic Service Providers.”

The law also authorized the Turkish Ministry of Finance to define which services qualify as digital services and to establish the procedures for applying the VAT rules. The Turkish Revenue Administration subsequently issued a Communiqué on January 31, 2018, setting out these procedures. Although the Communiqué was published at the end of January, its provisions applied retroactively from January 1, 2018. This means that digital services supplied during January 2018 were already within the new VAT regime.

To facilitate the transition, the Revenue Administration provided a special deadline for the first VAT return. VAT on digital services supplied during January, February, and March 2018 had to be declared by April 24, 2018, while the corresponding VAT payment was due by April 26, 2018.

The amended Turkish VAT legislation does not provide a definitive list of the digital services that fall within its scope. However, the Communiqué issued in connection with the legislation provides useful guidance on what the Ministry of Finance considered to be digital services.

The Communiqué covers a broad range of digitally supplied services, including services relating to websites and webpages, such as website or webpage provision, domain names, web hosting, and other website-related services. It also includes remote IT services, such as remote maintenance of computer software and equipment, remote system management, and online data storage.

The scope also extends to the sale and digital delivery of software and other digital products, such as software that is accessed, downloaded, or updated online, and the supply of images, text, information, databases, and similar digital content.

VAT Requirements for Non-Resident Digital Service Providers

Since there is no VAT registration threshold, non-residents that provide digital services to consumers in Turkey must register under the “Special VAT Registration for Electronic Service Providers” regime before making taxable supplies. To register for VAT, providers must complete an online registration form through the Turkish Revenue Administration's dedicated digital services website.

After the form has been submitted and processed, the provider is registered for “Special VAT Registration for Electronic Service Providers” with the Large Taxpayers Tax Office Directorate. This registration enables the non-resident provider to comply with its Turkish VAT reporting obligations electronically, including filing monthly VAT returns.

VAT-registered digital service providers must apply a 20% VAT rate to their supplies, up from 18% before 2023. Notably, those registered under the “Special VAT Registration for Electronic Service Providers” are not required to have their VAT returns certified or signed by a professional intermediary. 

Special Rules for B2B Transactions

The original VAT regime for non-resident digital service providers primarily concerned B2C transactions. However, from January 1, 2019, businesses registered under the “Special VAT Registration for Electronic Service Providers” must also report their digital service sales to business customers in Turkey. Rather than declaring the B2B VAT themselves under the special digital service regime, they must prepare a transaction list showing the relevant sales and upload it electronically to the Turkish tax system.

The list must be provided in an XML file and include data such as buyers' tax registration number, name, address, currency payment details, payment method details, and invoice date and number.

Compliance Practices for Digital Service Providers

Non-resident digital businesses entering the Turkish market should first map their customer base and determine whether their Turkish customers are individuals or VAT-registered businesses. This distinction can determine whether the special electronic services VAT regime or another VAT mechanism applies.

The absence of a definitive catalog in the final legislation creates an element of uncertainty for non-resident digital service providers. Businesses must therefore assess whether the nature and method of their services bring them within the Turkish digital services VAT rules, rather than relying solely on a fixed statutory list. For services subject to VAT, the provider should complete the required electronic registration before commencing regular VAT compliance and ensure that its systems can separately identify Turkish transactions.

Digital Services Tax (DST) as Another Layer of Complexity

Non-resident digital service providers must keep in mind that Turkey also introduced Digital Service Tax (DST) in 2020, which is a separate tax from VAT. Turkey's DST imposes a tax on the gross revenues generated from certain digital services, including digital advertising, online content sales, digital platform services, and similar digital activities. 

Unlike VAT, which is generally imposed on the supply of goods and services, the DST is calculated on gross revenues from specified digital services. Turkey decided to lower the Digital Services Tax rate in 2026. As a result, the applicable DST rate is 5% in 2026, with a further reduction to 2.5% scheduled for 2027. To fall under the scope of DST for non-resident businesses, their revenues from covered digital services generated in Turkey must exceed TRY 20 million, and their worldwide revenues must exceed EUR 750 million, or the equivalent amount in Turkish lira.

Conclusion

Navigating Turkey's digital economy requires a proactive approach to tax compliance, as non-resident providers must carefully distinguish between B2C and B2B supplies to meet their VAT obligations. Beyond the VAT regime, businesses should remain vigilant regarding the Digital Services Tax (DST) and its specific revenue thresholds. Success in this growing market ultimately depends on maintaining accurate customer data and staying informed about evolving regulatory requirements.